Business credit card fees explained

The main cost associated with using a business credit card is the interest that you pay on any balance that hasn’t been paid off at the end of the month. However, there are lots of other fees and charges to consider when choosing a business credit card.

At a glance

• Business credit cards charge interest on borrowing and impose a variety of charges for extra services, such as ATM withdrawals

• If you go over your credit limit or miss a monthly payment, you may also have to pay a one-off penalty 

• Getting to grips with rates, charges and fees enables you to pick the best business credit card for you and your company 

What are business credit card fees, rates and charges?

Business credit cards come with a range of fees and charges that you pay on top of the interest on your borrowing. There are three main types:

• Rates – The interest rates you pay on different types of borrowing. Cash withdrawals, for example, may incur a higher interest rate

• Fees – The penalties you pay if you break your credit agreement. Some card providers also have an annual fee

• Charges – The amounts you pay for extra services, such as using the card overseas or withdrawing money from an ATM

While handy for short-term borrowing and money management, this generally makes business credit cards a more expensive option than a business loan. 

You can find out how to choose between a business credit card and a business loan with our five-minute guide: Business credit card or business loan?

Do business credit card rates, fees and charges change over time?

• Credit card rates tend to go up and down in line with economic factors such as the Bank of England base rate. The rate you pay may also depend on your business credit score

• The fees you pay if you miss a monthly payment or exceed your credit limit, for example, are generally fixed and vary from one card provider to another

• Credit card usage charges – for instance, for balance transfers and ATM withdrawals – also vary between card providers and may be a fixed amount or a percentage charge

Five common business credit card fees

The main business credit card fees you may have to pay include:

• Annual fee – Many business credit cards have an annual fee, which can be anything from £30 to £150. This fee may not apply in the first year

• Late payment fee – If you don’t make at least the minimum payment by the due date, you may be subject to a late payment fee. This is usually around £12 but may be more. Missing payment deadlines can also have a negative impact on your business credit score

• Returned payment fee – If you exceed your credit limit or your bank balance is not sufficient to cover a payment, you may have to pay a returned payment fee or an over-limit fee. Again, these fees tend to be around £12

• Employee card fee – You may have to pay a fee if you want extra cards to give to your employees.

• Rewards/cashback fee – Some business credit cards come with reward programmes for which you pay a monthly or yearly fee 

Three types of business credit card charges 

The main types of business credit card charges to be aware of are:

• Foreign transaction charges – Transactions in a foreign currency often incur a foreign transaction fee, which could be a set amount or, more commonly, a percentage of the transaction amount. This varies between providers but is usually around 3%

• ATM charges – Many business credit card companies charge a cash advance fee on ATM withdrawals. Again, this is usually around 3% of the amount withdrawn. Such transactions also often attract interest from the day you make them, even if you pay your balance in full within the interest-free period

• Balance transfer charges – You often have to pay a fee to transfer a balance from another credit card to your business credit card. This fee is usually a percentage of the amount transferred. Most companies charge 2-3%

How are business credit card rates calculated?

The main interest rate you pay on a business credit card is the APR (annual percentage rate), which indicates the percentage rate that borrowing a sum of money costs you over a 12-month period. 

Most providers promote their cards using a representative or typical APR, which is the rate they must offer to at least 51% of customers who successfully apply for the card. 

However, you may have to pay a higher rate if your business credit score is low, for example. 

What factors impact your business credit card rate

There’s a range of factors that impact your business credit card rate. Some are within your control, others are not. They include:

• The base rate – Most business credit cards have variable interest rates that go up and down depending on the Bank of England base rate

• The credit card market – If there's a lot of competition in the marketplace, you can often find lower interest rates by seeking out companies keen to attract business customers

• Introductory offers – Some business credit cards offer new customers a low or 0% interest rate for a certain period

• Interest-free periods – Many business credit cards offer an interest-free period on purchases but not cash withdrawals. This generally lasts for around 40 days

• Your business credit rating – The higher your business credit score, the more credit cards you can choose from 

Top tip!

While it is possible to use a personal credit card for business use in some cases, there are disadvantages. Find out more with our handy guide on using a personal credit card for business. 

How to avoid business credit card fees

With careful management, you can avoid most business credit card fees. Ways to do this include:

• Shopping around – Pick a business credit card with low or no annual fees

• Paying on time – This helps you maintain a good credit score while avoiding late payment fees. Setting up reminders or automatic Direct Debit payments can help

• Taking advantage of rewards – If you are paying for a rewards or cashback programme, maximising the benefits can offset the cost

• Managing your spending – Stay well within your credit limit to avoid declined payments

• Reading the small print – It’s vital to understand the terms and conditions of your business credit card
  

How to choose the right credit card for your business

When it comes to choosing a business credit card, consider all the fees and charges before you apply. The best card for your business depends on how you plan to use it. 

Things to bear in mind include:

• Will you clear the balance in full each month? If so, you don’t need to worry so much about the APR

• Do you need to spend money overseas? You may be able to get a business credit card that offers free foreign currency transactions

• Is there an introductory offer? 0% interest periods on purchases or balance transfers can be handy, as long as you have a plan for when the introductory period ends

• Are you eligible? An eligibility checker can help you work out which cards you are likely to be approved for when you apply

Read more …

• What is a business credit card?

• How to choose a business credit card

• Can you use a personal credit card for business?

• Should you get a business credit card or business loan?